In 9 Months… Gov’t Collects Le 3.13 Trillion -J.J. Saffa

 

The Minister of Finance, Jacob Jusu Saffa presenting the country’s 2019 budget to parliament for ratification reported impressive revenue collection for the period January 2018 to September 2018, which according to him, is as a result of applying a rigid financial reform regime geared towards curtailing waste and maximizing revenue intake.

Against the background of a Budget, he describes the policies and programmes to restore fiscal discipline, diversify the economy for sustained inclusive growth and job creation, promote human capital development while at the same time increase the role of the private sector and expand social protection services consistent with the Sustainable Development Goals (SDGs) and the new National Development Plan.

Addressing parliamentarians, Finance Minister J.J. Saffa said: “I am pleased to report that the fiscal consolidation efforts pursued since April 2018 have resulted in improved revenue collection during the second and third Quarters of 2018. Total revenue collected during the first half of the year amounted to Le 2.01 trillion. Total collection for Quarter 3 is estimated at Le1.12 trillion, giving a total of Le3.13 trillion for the first three quarters of the year. This is 30% higher than the amount collected during the same period in 2017. For the year as a whole, domestic revenue is projected to increase to Le 4.45 trillion, equivalent to 14.3% of GDP compared to 12.6% of GDP in 2017.”

According to the Finance Minister, the improved performance in revenue is owing to the implementation of key revenue enhancing measures contained in Executive Order No.1 including the rationalisation of duty and tax waivers; implementation of the Treasury Single Account (TSA); the collection of arrears of debt services owed by Stated Owned Enterprises; and streamlining the process for the payment of import and excise duties for petroleum products.

“The enhanced enforcement of tax compliance, combined with the drive of the new leadership contributed to the improved revenue performance during the second and third quarters of the year,” the fire brand politician averred.

On the expenditure side, the Finance Minister pointed out that total expenditure and net lending amounted to Le3.25 trillion for the period January to June 2018, adding that total expenditure for Quarter 3 is estimated at Le1.53 Trillion, giving a total of Le4.78 trillion for Quarters 1 to 3 of 2018. Recurrent expenditure, he furthered, amounted to Le3.21 trillion and domestic capital, Le426.9 billion. He continued that foreign-financed capital expenditure amounted to Le1.06 trillion, whilst total expenditure and net lending is projected at Le7.38 trillion (23.8 percent of GDP) in 2018.

However, the Finance Minister pointed out that the budget still continues to run a deficit, noting that the overall fiscal deficit, excluding grants is estimated at Le1.18 Trillion for the first half of 2018. He further affirmed the deficit, including grants, is estimated at Le975.9 billion. The budget deficit, the economics expert added, is projected to reduce to 6.1 percent of GDP in 2018 from 9.0 percent in 2017.

According to J.J. Saffa, during the first half of 2018, borrowing from the commercial banking system to finance the deficit, which occurred mostly in Quarter 1 amounted to Le535 billion. Government made a net repayment of Le 84.1 billion to the Bank of Sierra Leone, including a repayment of the Ways and Means Advances of Le24.1 billion, adding that a repayment of Le36 billion was also made to the non-banking sector.

On the outlook of the Economy in the Medium-Term: 2019 to 2021, the Finance Minister Saffa, assured that the medium term prospect of the economy is bright.

He continued that total real GDP is projected to grow by 5.4 percent in 2019 and 2020 and further by 5.1 percent in 2021. And excluding iron ore, the economy is projected to expand by 5.1 percent in 2019 and further by 4.9 percent in 2020 and 2021.

The Finance Minister maintained that the positive and steady economic growth will come from the following sources: (i) the expected resumption of iron ore mining at the Marampa Mines in 2019 and at the Tonkolili Mines in 2021 as well as expected increased investments in diamond, rutile and gold mining activities; (ii) reforms and stronger foreign direct investment in the agriculture, fisheries, and tourism sectors; (iii) the resumption of domestic funded road construction activities; (iv) scaling up and improving the efficiency of public investment in roads, energy and the water sectors; (v) increasing investment in human capital development; and (vi) deepening structural and business regulatory reforms to improve competitiveness and the ease of doing business.

With inflation a burning national concern, Minister Saffa noted, inflation is projected to gradually decline to 14 percent in 2019 as the impact of the increase in fuel prices wanes and the exchange rate stabilizes.

The Finance Minister further disclosed that inflation will return to single digit in 2021 due to higher agricultural production; stability in the exchange rate and the tight stance on monetary policy by the Bank of Sierra Leone.

On management of the budget deficit, the Minister maintained that, the sustenance of fiscal consolidation efforts is expected to result in a reduction in the overall budget deficit, including grants, to an average of 3% of GDP during 2019 to 2021 from 9.0% in 2017 and 6.1% in 2018.

The current account deficit, he added, will reduce from 14.0% of GDP in 2018 to 12.7% in 2019 and narrows further to 10.9% of GDP in 2020 as exports are expected to increase faster than imports in the medium term.

He assured that efforts will continue to maintain the public debt at the sustainable threshold of not more than 70% of GDP in nominal terms and 55 % of GDP in Present Value (PV) terms, adding that external debt will be kept at not more than 40 percent of GDP in Present Value terms.

On the country’s ability to sustainably finance its import bill, Minister Saffa continued, gross foreign reserves will remain above the threshold of 3 months of import cover over the period as the policy of repatriating of export proceeds is enforced.

According to Minister Saffa, there are risks to the positive outlook of the economy, stressing that while the prospects of the economy are promising, the following risks can constrain the achievement of the macroeconomic objectives highlighted in the forgoing paragraphs:

(i) A continuous slump in the price of iron ore, our main export commodity, could delay the resumption of iron ore mining, with negative implications for growth, revenue, and foreign exchange earnings;

(ii) A further rise in the international prices of petroleum products and its implications for domestic inflation, given the full pass-through into domestic pump prices;

(iii) Delays in the disbursement of budget support and subsequent implications for financing priority programmes in the 2019 Budget could adversely affect the outlook of the economy.

However, he disclosed that there are domestic economic policies to mitigate the risks and achieve the medium term objectives.

To mitigate these risks and increase the prospects of achieving the macroeconomic objectives set out in the preceding paragraphs, Government, Mr. Saffa said, will pursue prudent fiscal and debt management policies, proactive monetary policy, stability-oriented financial sector policy and market-based exchange rate policy. This, according to the Finance Minister, will be combined with reforms to improve the business climate and enhance productivity of agriculture, fisheries and tourism sectors.